The simplest explanation for the upside surprises to UK activity over recent months would be that lockdown measures have been released sooner and faster than expected. But the pace of release from lockdown in the UK has in fact been broadly in line with what the Bank had expected in May. The biggest surprise has been the robustness of peoples’ spending behaviour in the face of lockdown constraints and other risks, not the evolution of these constraints and risks per se.
The behaviour of UK consumers has been most surprising. Based on our suite of fast indicators, UK consumption has been rising by, on average, around 2% per week since May.
As best we can tell, consumer spending now stands at around pre-Covid levels. In other words, consumption has fully recovered more than a year earlier than the Bank expected as recently as August. Large-ticket purchases, such as cars and houses, are also back to around pre-Covid levels.
Against a backdrop of more than 40,000 Covid-related deaths, an extra 1 million people unemployed and perhaps a quarter of the workforce having faced a cut in their incomes, the speed and scale of this recovery in consumption is, I think, fairly remarkable.